Foundation leaders can no longer assume that policymakers share their view of the sector’s role—it is up to these leaders to tell philanthropy’s story in a way that can be appreciated and understood. This was among the conclusions of the members of the Aspen Philanthropy Group in their inaugural meeting last July. It was a key theme that emerged in a concurrent nonprofit sector-wide strategy session led by the Independent Sector in Colorado Springs. And it was a refrain at this year’s Council on Foundations’ Annual Conference.

At a time when state legislators are seeking to shift responsibility for financing social services from the public to the philanthropic sector, the Council legal team called attention instead to the US Congress, where some members have questioned the tax exemptions that foundations enjoy. The team reports that this Congressional sentiment is only shared by a few Members and that calls for change are at a “low simmer.” Nonetheless, according to the Council’s Kelly Shippe Simone and Chatrane Birbal, Congress is expected to consider tax reform measures, including tax exemption, next year.

While that gives nonprofit advocates time to make their case, APG would argue that the issue is not a matter of fending off legislation or of defensive moves more generally. Rather it is a matter of efficacy. Those who seek to advance the public good need to partner and to leverage one another so as to enhance their collective impact. Doing so first requires an understanding of their respective roles. Arguments between the public and philanthropic sectors are an indulgence we cannot afford, not at a time when the resources of both are reduced and public needs have expanded.

If Congress were to double or triple the private foundation excise tax, asks Joel Orosz of Grand Valley State University, “does anyone truly think that there will be a groundswell of support for foundations” that resist? In a March 10 guest post to the Center for Effective Philanthropy blog headlined “Déjà vu (or 1969) All over Again?”, Orosz suggests it’s too late for foundations to react effectively to stem a possible backlash against the sector. Still, the philanthropy professor counsels foundations to take steps on their own to improve practices, including training employees to be more professional and more accountable to nonprofits.

Orosz is just one of several commentators recently suggesting that a growing populist fervor in society isn’t just anti-government, but anti-institution—and a threat to philanthropy, one that can’t be summarily dismissed and should propel changes. For example, in Small Change: Why Business Won’t Save The World, Michael Edwards wrote that foundation leaders will vociferously resist and complain about the many suggestions he makes in the book calling on Congress to require more transparency and accountability from foundations. But Edwards, a senior fellow at the think tank Demos and the leading skeptic of philanthro-capitalism, says that public and political pressure will eventually build and force changes in the sector. Similarly, in a February 25 Chronicle of Philanthropy opinion piece, the Hudson Institute’s William Schambra argued that philanthropy’s increasingly business-minded approach is at odds with the populist mood of the American public on both ends of the political spectrum. He thinks the tide is turning against foundations.

To help improve the situation, Thomas David of the Community Clinics Initiative argues that foundations should show they’re making sacrifices in this economy along with everyone else. It should not be a time of hunkering down, cutting grantmaking, trimming staff and expenses or focusing on re-growing endowments. Instead, David writes in an essay published by Grantmakers in Health (GIH) that foundations should make some big bets, ease up on control of grantees and practice mission-related investing. In other words, take risks that put them on the line in ways that might tangibly, not just symbolically, benefit nonprofits in a time of need. More specifically, David advises foundations to increase their grantmaking this year—even if they’re one of those already exceeding 6 percent payout. He complains that over the past couple of decades, foundations have evolved to become more risk averse than ever; they’re so focused on assets that growth is their priority, not giving.

David’s hard-charging essay is just one of several included in Taking Risks at a Critical Time, released in March in tandem with GIH’s 2010 annual meeting. Foundations hesitate, according to this publication, in part because of an over-reliance on proven practices, unwarranted anxiety about engaging in public policy and avoidance of failure of any kind, despite the fact that a healthy proportion of failures in a grant portfolio is a sign that a foundation is successfully venturing in new territory. The lead essay includes examples of “risk taking in action,” efforts to improve health.

Tom David is not optimistic, however. He essentially calls foundations fair-weather friends to nonprofits: “It is at times like this that nonprofits, who like to think of foundations as allies in their struggles, have learned not to count on their friends when they need them most.” I wonder. It is not the role of foundations to support nonprofits based on need, but rather based on merit, because doing so fits a larger strategy—one that produces a social benefit. I have a good deal of faith that foundations will do their best to achieve that end. But the way in which they do it must take into account the public mood, and even distrust that these observers so powerfully describe. No institution is being given a pass, particularly one that is seen as opaque while claiming to advance the public good. “Trust us” has never been an adequate response to doubters.

Yesterday, the U.S. House passed the Edward M. Kennedy Serve America Act. Following Senate passage of the same language last week, this means the bill will now be sent to President Obama so that he can sign it into law.

Unfortunately, the bill does not contain language creating a Commission on Cross-Sector Solution, as we mistakenly reported last week. It does, however, include a new Social Innovation Funds Pilot Project, through which the Corporation for National Service will award grants to local programs. We are pleased to see that Congress appreciates the valuable contributions of social entrepreneurs and also understands the need to measure the effectiveness of programs so that philanthropists can identify and fund the kinds of programs that work. Here are the congressional findings related to this program, along with its stated purpose:

(a) Findings.–Congress finds the following:

(1) Social entrepreneurs and other nonprofit community organizations are developing innovative and effective solutions to national and local challenges.

(2) Increased public and private investment in replicating and expanding proven effective solutions, and supporting new solutions, developed by social entrepreneurs and other nonprofit community organizations could allow those entrepreneurs and organizations to replicate and expand proven initiatives, and support new initiatives, in communities.

(3) A network of Social Innovation Funds could leverage Federal investments to increase State, local, business, and philanthropic resources to replicate and expand proven solutions and invest in supporting new innovations to tackle specific identified community challenges.

(b) Purposes.–The purposes of this section are–

(1) to recognize and increase the impact of social entrepreneurs and other nonprofit community organizations in tackling national and local challenges;

(2) to stimulate the development of a network of Social Innovation Funds that will increase private and public investment in nonprofit community organizations that are effectively addressing national and local challenges to allow such organizations to replicate and expand proven initiatives or support new initiatives;

(3) to assess the effectiveness of such Funds in–

(A) leveraging Federal investments to increase State, local, business, and philanthropic resources to address national and local challenges;

(B) providing resources to replicate and expand effective initiatives; and

(C) seeding experimental initiatives focused on improving outcomes in the areas described in subsection (f)(3); and

(4) to strengthen the infrastructure to identify, invest in, replicate, and expand initiatives with effective solutions to national and local challenges.

With respect to the evaluation component, the bill included language allowing the Corporation to dedicate up to 5 percent of the funds available to the program “to support, directly or through contract with an independent entity, research and evaluation activities to evaluate the eligible entities and community organizations receiving grants … and the initiatives supported by the grants.”

John Bruton, former Irish Prime Minister and current EU Ambassador to the United States, urged Congress on Monday to refrain from any “Buy American” provisions in the American Recovery and Reinvestment Act now headed to the Senate. Bruton expressed the EU’s concerns over such action, saying that if approved, the measure would set a “dangerous precedent” for protectionist policies. A BBC article today quotes Ambassador Bruton as saying that “Nobody will take this lying down.” And that it would take the world on the same exact path that we took in the 1930s – when, Burton believes, retaliatory protectionism caused the Great Depression to last years longer than it might have otherwise.

Ambassador Bruton shared these same thoughts when he joined us at the Council on Friday to talk about what the new administration in Washington might mean for transatlantic relations. He spoke about ways in which governments on both sides of the Atlantic can turn a series of separate problems into a chain of interlinked opportunities – particularly regarding the financial crisis of late. Bruton warned that this “Buy American” clause would sap global confidence and trigger more protectionist policies at the very time that we should be opening up and working together to turn this crisis into an opportunity for global cooperation.

A Wall Street Journalarticletoday from the end of last month highlights a threat to foundations nationwide. Members of Congress are saying that foundations have an obligation to use the money they save with tax exemptions – money that otherwise would have gone to the federal government – where it will have the greatest impact on public good. Meaning – where Congress thinks it will have the greatest good. If they do not feel that foundations are doing this, they are threatening to get rid of charitable tax exemptions.

To counter this threat, a new organization called the Philanthropic Collaborative commissioned a research project to convince policymakers of the benefits of philanthropic dollars. The study finds that foundations have a much more positive economic impact on society than we had thought, that “for the $43 billion that foundations spent on grants in 2007, they created direct economic benefits of $368 billion.”

Perhaps policymakers will find that the benefits of foundation work ‘as is’ will significantly outweigh any gains that could be gleaned by denying them their charitable deduction.